US$18 billion sale of Toshiba's Memory Corporation to consortium that includes Seagate and Apple is approved

Toshiba, the Japanese electronics giant, has fallen on hard times in the last few years with the combination of their US-based Westinghouse Electric Company (nuclear reactors) and an accounting scandal that resulted from falsified records, leading to substantial financial loses. Because of this, Toshiba has been in the process of selling off parts of their corporation for cash injections. These include a vast majority share of their TV business, medical equipment, and household goods.

The biggest sale was that of Toshiba Memory Corp, their market leading semiconductor business that is the largest producer of NAND flash in the world. A consortium of companies led by Bain Capital — specifically Seagate, Dell, Apple, Kingston, and SK Hynix — had previously agreed to buy the company for JP¥2 Trillion (US$18 Billion). They had run into two main issues, the first of which was Western Digital blocking the move due to a collaborative agreement between their subsidiary, SanDisk, and Toshiba. This was sorted out, but regulatory approval for anti-monopoly practices still needed to be granted before the sale could go ahead.

Chinese regulatory authorities have now granted the permissions needed for the sale to go ahead. Completion of this sale will mark Toshiba’s return to profitability for the first time since their financial woes came to light a few years ago. Since Toshiba had previously agreed to this deal, they are obliged to see it through. If the Chinese authorities had denied the sale, then Toshiba may have decided not to sell their semiconductor business since recent cash injections from an over US$5 billion share issue earlier this year had significantly improved their bank balance. They may have preferred to sell additional shares in Toshiba Memory Corp instead of selling it outright.